Since understanding the meaning of a statement depends upon knowing its grammatical analysis, the scholars - may Allaah have mercy upon them - have paid great attention to the grammatical analysis of laa ilaaha illallaah. So they say:
The word: laa [which means: No] is known as a particle of absolute negation. The word: ilaah is its corresponding noun, which is inflected and which carries with it an implication of an omitted syntactical term (taqdeer). In this case the taqdeer is designated as being the term: haqq (right); meaning that none has the right (or deserves) to be an ilaah. The phrase: illallaah (except Allaah) is an exception to the previous negation and is in the nominative case.
The meaning of ilaah is: That which is deified with worship. It is that which hearts love, adore and deify; hoping in it for the attainment of benefit or for the protection against harm.(1)
It is an error to think that the ellipsis (taqdeer) is the word:
Existence (mawjood) or object of worship (ma’bood), because [the declaration of Faith would then mean: No deity exists except Allaah, or: No deity is worshiped except Allaah]; whereas there are many things in existence that are worshiped besides Allaah; such as idols, tombs and other things. However, the only One that has the right to be worshiped is Allaah and whatever else is worshiped besides Him is futile: the worship of which is false.
(1) Thus, the meaning of is: That none has the right to be [deified and] worshiped, except Allaah.